You can try deleting the sdcache.db that should be in the folder. That may be holding on to the old channel list.Also - if youre manually running this, the xmltv.xml file is going to be generated in the main addon folder (.kodi/addons/tools.module.sd2xmltv). When you run it from within tvh - that file will be placed under the userdata/addon_data/tools.module.sd2xmltv folder. tvh won't read the one in the main folder. However, as a test - you can copy it over from the main folder to the user_data folder - then restart and see if tvh can see the epg source in the channels tab.
I think your on to something there with the xmltv.xml file needing to be in the TVH folder. I re-ran the code for local channels only but included the -o tag to output the file directly to the TVH folder, versus moving it over after the fact. I checked TVH again and the log showed it was successful in pulling the xmltv.xml file.
I did delete the sdcache.db file and re-ran the code with the Verizon channel list, but it once again froze in place with the RPI having a constant RED/GREEN LED on. I feel like we are close....